ABSTRACT
When India relaxed its foreign-investment rules concerning retailing, Wal-Mart sought to enter a new $490 billion market. But soon the company came face-to-face with distribution challenges that threatened its business model of utilizing an efficient logistics system to deliver low prices to consumers. India is the world’s second largest producer of fruits and vegetables. But a lack of refrigerated trucks and proper roads causes the country to lose one-third of its produce to spoilage on the way to market. A system of government-imposed middlemen creates numerous agents each taking a fee along the way. Those fees alone can increase farm-to-store costs six-fold. And WalMart stores themselves could prove costly, with most real estate in India’s large cities selling at a premium. 1 Global marketers face similar problems with distribution infrastructure in Indonesia. But poor roads and a lack of retail space across Indonesia’s 17,000 islands didn’t prove as great a challenge to Tupperware, a producer of plastic containers for leftovers. The company circumvented traditional channels and used a salesforce primarily consisting of housewives to store and deliver their products. Soon Indonesia became Tupperware’s largest national market. 2
Distribution systems have traditionally been shaped by a variety of factors-level of economic development, disposable income of consumers, the quality of infrastructure such as roads and telecommunications, as well as culture, physical environment and the legal/political system. Global marketers need to understand how environmental influences may affect distribution strategies and options. Using this knowledge, they must establish efficient channels for products on a countryby-country basis. They must also consider how the emergence of regional and global distributors and changes in global logistics can affect their operations at the transnational level.
